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Google's answer is "Superphone"

Fri, 2010-01-08 12:47 — Valerie Arnould

Article ID:

11004

Intensifying Smartphone Competition

On January 5, 2010, Google announced its Nexus One wireless handsets powered by Android 2.1, only slightly more than a year after the announcement of the first Android-powered phone, HTC's G1. The phone is sold by Google and manufactured by HTC.

Andy Rubin, VP of Engineering of Google explained that "The Nexus One belongs in the emerging class of devices which we call superphones,’ with the 1GHz Qualcomm Snapdragon chipset making it as powerful as your laptop computer of three to four years ago.We look forward to working with handset manufacturers and operators to bring more phones to market through this channel worldwide.
For the time being, the phone is sold in Google’s online store for $529 without contract and $179 with a 2-year contract with T-Mobile. But Google said that Verizon Wireless and Vodafone will also get the Nexus One phone soon.“We believe that the overall market for unsubsidized phones at $579 would be rather limited. Most of the volume is likely to be from heavily subsidized phones associated with activation of T Mobile service plans. During the first quarter, Nexus One is likely to be only at T Mobile. Given the smaller size of the carrier, we believe that the uptake in the first quarter will be relatively low. AT&T had previously commented that iPhone accounted for 40% of its gross adds. If T Mobile USA would see a similar ratio, then the volume for Nexus could be in the range of 1 million for the first quarter” says CreditSights' Senior Analyst -Telecom and Telecom Suppliers Zhiping Zhao.

What’s the strategy for Google in the mobile world?

Google has been eyeing mobile space as an area for future growth. However, the design and sale of its own branded phones does raise the question on what the intention of the company is within the mobile space says CreditSights' Senior Analyst -Telecom and Telecom Suppliers- Zhiping Zhao. And she continues: “To date, Google has pushed for three main avenues to enter the mobile arena. First is clearly mobile advertising – which it recently acquired AdMob. We also believe that Google wants to replicate its internet ad success to the mobile space. Second is the investment in Clearwire. We believe there are and will be frictions between Google and carriers. The third possibility is that Google believes that it can be highly successful and profitable in the handset business –much like Apple has done. Given the generally low bar of user interface of phones from the traditional handset makers, well designed phones can indeed quickly gain traction – evidenced by Apple’s iPhone. Since the introduction of iPhone in 2007, Apple has become the number three handset maker in terms of revenue.”

Didier Durand, head of Architecture & Technology / Business Engineering at Publicitas believes in a promising long term strategy (his article on the topic, in French : http://media-tech.blogspot.com/2010/01/google-android-iphone-hegemonie-l...): Google is serving its own direct interests: grow the use of the web (mobile or otherwise) in order to continue to grow its revenues to 98% advertising. How to do this: lower the entry barrier (= handset + subscription) by starting with the handset, as it is the only one of the two components within its reach at present. The web must increase its existing 10-15% share of the advertising spend in order to achieve its own financial ambitions. This strategy attaches major importance to collaboration: in contrast to Apple, Google is not aligning itself with developers or with mobile operators. It offers them an alternative to arrogant Apple which allows them more scope to serve their own interests, while at the same time getting them to work in its direction. The Google project overtakes the industry that it wants to shake up in order to establish the bases for a much greater global presence: PointGPhone announces a microwave (connected to the Internet) and a washing machine driven by Android.
In the final instance, this strategy benefits from the patience that Google can afford to show and the money it can invest in the long term, with its tens of millions in the bank ....
The vision of components of our everyday lives running under Android may raise a smile today, but could this perhaps turn into a forced laugh for many players in various branches of industry if the omnipresence of Android in the tools of the everyday lives of consumers becomes a reality? And who, if not Google, cannot provide all these tools of everyday life with highly targeted advertising, and thus direct towards itself the global advertising spend valued at US$ 450 billion (75% of the 630 billion in 2007 – a result of the crisis ...) still firmly tied to the traditional media?

The test of online advertising blitz

-Google said it plans to focus its marketing on the (Nexus One) phone online for now, a decision some analysts questioned in light of Apple's marketing blitz for the iPhone. ‘Unless [Google] gives it a big push with marketing dollars, which they are not, consumers aren't going to know the phone exists,’ said Current Analysis analyst Avi Greengart (source : Google Opens New Front in Smart Phone Battle, Wall Street Journal, January 6)

- Those who think that the Nexus One has no chance to get known in the market are making a big mistake: Google has joined the top 10 worldwide brands without having to spend even one dollar on advertising. Due to this high profile, on its homepage it can in future display an ad 30,000 times per second (the equivalent of several million dollars daily!) for Nexus One. It has already started!, says Didier Durand (http://media-tech.blogspot.com/2010/01/nexus-one.html#links)